First Solar Stock at Support Zone – Bargain or Trap?
First Solar (FSLR) stock should be on your watchlist. Here is why – it is currently trading in the support zone ($232.18 – $256.62), levels from which it has bounced meaningfully before. In the last 10 years, First Solar stock received buying interest at this level 3 times and subsequently went on to generate 19.6% in average peak returns.
| Peak Return | Days to Peak Return | |
|---|---|---|
| 5/12/2023 | 29.8% | 397 |
| 7/18/2024 | 10.2% | 40 |
| 9/4/2024 | 18.7% | 23 |
But is the price action enough alone? It certainly helps if the fundamentals check out. For FSLR Read Buy or Sell FSLR Stock to see how convincing this buy opportunity might be.
Single stock can be risky, but there is a huge value to a broader diversified approach we take with Trefis High Quality Portfolio. Trefis works with Empirical Asset Management – a Boston area wealth manager – whose asset allocation strategies yielded positive returns during the 2008-09 period when the S&P lost more than 40%. Empirical has incorporated the Trefis HQ Portfolio in this asset allocation framework to provide clients better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.
Here are some quick data points for First Solar that should help decision:
- Why MU, FSLR Could Outperform GLOBALFOUNDRIES Stock
- Better Value & Growth: FSLR Leads ON Semiconductor Stock
- Why FSLR Could Outperform Texas Instruments Stock
- Stronger Bet Than ON Semiconductor Stock: FSLR Delivers More
- First Solar Stock Slides -8.6% With A 5-Day Losing Spree
- After a 35% Surge, Can First Solar Keep Shining?
- Revenue Growth: 19.4% LTM and 19.8% last 3 year average.
- Cash Generation: Nearly -22.9% free cash flow margin and 32.3% operating margin LTM.
- Recent Revenue Shocks: The minimum annual revenue growth in last 3 years for FSLR was 12.6%.
- Valuation: FSLR stock trades at a PE multiple of 20.7
- Opportunity vs S&P: Compared to S&P, you get lower valuation, higher revenue growth, and better operating margins
For quick background, First Solar provides photovoltaic solar energy solutions by designing, manufacturing, and selling cadmium telluride solar modules that convert sunlight into electricity.
| FSLR | S&P Median | |
|---|---|---|
| Sector | Information Technology | – |
| Industry | Semiconductors | – |
| PE Ratio | 20.7 | 24.0 |
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| LTM* Revenue Growth | 19.4% | 5.2% |
| 3Y Average Annual Revenue Growth | 19.8% | 5.3% |
| Min Annual Revenue Growth Last 3Y | 12.6% | -0.1% |
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| LTM* Operating Margin | 32.3% | 18.6% |
| 3Y Average Operating Margin | 18.7% | 17.8% |
| LTM* Free Cash Flow Margin | -22.9% | 13.3% |
*LTM: Last Twelve Months
What Is Stock-Specific Risk If The Market Crashes?
That said, FSLR isn’t without risk. It fell about 72% during the Global Financial Crisis, over 52% in the 2018 correction, and nearly 50% in both the Covid crash and the inflation shock. Even in less severe downturns, the stock can take a big hit. Solid fundamentals don’t guarantee immunity when the market sells off hard.
But the risk is not limited to major market crashes. Stocks fall even when markets are in good shape – think events like earnings, business updates, outlook changes. Read FSLR Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.
The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.